Thursday, 26 November 2009

If Mr Armstrong is right (and yes, he invariably is), you should not buy a house any time soon, unless you are not buying it as an investment or a store of value as people have in the recent past, but purely as somewhere you want to live in for a long time. Similarly, if you are considering selling your home because you are realising perhaps that you are having, or might soon have, trouble keeping up with the mortgage payments, this article might help you make up your mind whether to do that or not.

Please note, the graph and overall forecast in this report are discussing the real value of property over the coming years, but in today's fiat currency world the nominal price is not likely to drop as far, or possibly even at all — hell, maybe if they really get busy with the printing presses the numbers might even go up, who can say? The upshot of all this is that you may or may not lose on property in nominal terms over the coming years, but in real terms you almost certainly will. "Other stuff" will go up in nominal value (or perhaps not go down as much) more than property will.

Wednesday, 25 November 2009

If you are still debating with yourself whether it would be good for the UK to join the euro bloc or not, look no further than Greece, Spain, or Ireland to see that it is a straightjacket that removes all options of local control. If you join the euro area, you are automatically tied at the hip to Germany's economy. Germans are desperately wary of creating inflation, and their still-operative export-based economy is still bringing in enough to just about pay the bills so they are not (yet!) forced to join the global money printing orgy to any significant degree. As you can see, Greece, Spain and Ireland are facing up to the fact that the costs of their socialist welfare-state economies are unsustainable.

France is stealthily going behind the curtain recently with their quiet loan to spend on more social largesse, trumpetted as more "investment for the future". Yeah, when was a debt ever an investment? If you believe that, perhaps you would like to lend me a million pounds over 30 years for 4% interest, so that I can "invest it in paying off my previous loans that are coming due, plus feeding and educating my kids"..? Maybe in a year or two you will then give me a new loan for two million, which I will use to repay the earlier loan you gave me, and to pay for feeding and educating another batch of children? This is called a Ponzi Scheme when Madoff does it, but when a government does it well that's just peachy.

In the past, all of these countries simply would print up more money (Quantitative Easing in today's parlance) to paper over the problem, by devaluing their local currencies. Like, for example, we are doing in the UK, and the American's are doing in the US. Now those hamstrung nations within the euro zone have this option removed from their menu. There is no other choice but some combination of cutting costs (people are starting to riot already, and they haven't even really begun to do what is necesary), raise taxes (good luck), or default on their debts and suffer the crippling consequences of that. Nice set of options there.

No, here we have the very reasons for staying OUT of the euro zone. I don't care what our leading politicians might tell you. They are all to a man simply looking after their own selfish interests.

In the UK we will continue to use our additional traditional option, printing more pounds to reduce the value of our debt to other nations. This is so much more acceptable to the average voting member of public, because it is more subtle and 99.9% of them don't even realise it is happening. The extent of our problems is such that we will do this in addition to also both raising taxes and significantly cutting public costs.

Labour will be voted out next year because people aren't feeling an economic glow any more. The Conservatives will be voted in, and they will take a razor to the welfare state and all public services, simply because it is unavoidable. Once again the cycle will turn, and we will have a new Thatcher to hate in Cameron. Few will realise they are punishing Cameron for Brown's mistakes, much as few realised they were congratulating Brown for the previous government's good stewardship and plans for the economy as handed over.

Monday, 16 November 2009

There will be a "new, independant government agency" setup to provide financial education. This sounds like a laudable development that has been a LONG time coming, since most people come out of school completely clueless about all things financial and then they wade far out to become neck-deep in debt before too many years of their working lives have passed, and most of us will never completely escape this trap. Helping people avoid the issue seems like the only sensible thing to do. In fact, I would argue it should be right up at the top of the curriculum with the three R's myself, because it is a fundamental life skill to be able to manage money and budgets, at least at a rudimentary level.

But on closer inspection I realise that this new initiative is purely a palliative measure, because the education will not be given to all and sundry as part of the curriculum. It will be taught to people by an agency when they are in trouble already. This is far too late! Perhaps it will help some people avoid going irretrievably in too far, which is of course better than nothing.

But why stop short like this? Ask yourself who stands to benefit from most people being in debt to at least some degree, and the answers you might come to will not include you and me the average chump debt slave on the street.

No, someone out there much prefers to keep the average person on the street disinterested in all matters relating to money and finance, so they prefer to trust those nice people in the financial services industry. You know, those clever people in the big houses, with the Porsches and the yachts. Someone has to give them the money they use to buy those things, and if you didn't realise already, that person is you!

Sunday, 15 November 2009

As just about the only major global investment bank to sail almost unscathed so far through the economic winds of the last couple of years, HSBC know a thing or two about prudent speculations and economic trends, I think it is fairly safe for me to state here.

Disclaimer

The content on this site is provided without warranty, express or implied. All opinions are those of the author and may contain errors or omissions.

No material here represents investment advice and you should not base your investment decisions on what you read here without performing your own due diligence and/or seeking professional advice, as appropriate. Actions taken as a consequence of any analysis, opinion or advertisement on this site are taken at your sole responsibility.